Archive October 2019

Consumer credit: households are borrowing more and more for their projects

Despite a more modest growth compared to previous years, the French are still seeking consumer loans to finance their projects.


11 billion dollars of credit cons released in Q3 2019

money loan

With data provided anonymously by banking establishments and compiled by the French Association of Financial Companies (ASF), it emerges that loan production is growing despite a slow start to the year. In one year, mortgage off household funding has actually increased by 5.3% in Q3 2019, a fresh generation of nearly 11 billion dollars.

By accounting for the outstanding amounts released over the first 9 months of the year, which totaled 32.7 billion dollars, the market is up 2.4% year-on-year. However, compared to the dynamic increase in consumer credit in 2018, up 6.2% over the same period, this is relatively modest growth. Especially since the score is even below more distant years since the production of consumer credit increased by 5.3% in 2015, 6.4% in 2016 and 4.7% in 2017.

In detail, revolving credit jumped + 3.4% to more than 2.6 billion dollars. And certain loans for household projects are subject to sustained growth. This is particularly the case for consumer credits allocated to a project which is informed to the bank before the financing is put in place. Home improvement and home improvement loans were up 18.2%. In this category, it is possible to find work loans for example, which shows that the French are still attached to DIY and home improvement. Also in the appropriations allocated, the sums released for the purchase of used vehicles increased by 11%, while the outstandingand for the new home market fell by 2.6%.


Classic car credit surpassed by rental with and without purchase option

Classic car credit surpassed by rental with and without purchase option

In addition, the financing of vehicles by rental with or without purchase option overhangs conventional loans in terms of outstanding production. Specifically, all auto loans have more than 1.5 billion dollars in Q3 against 2.2 billion for rental with purchase option (LOA) and the long-term rental (LLD). This type of service is also experiencing the strongest growth with + 47.3% for the LOA of used vehicles and + 26.2% for the LLD.

Statistics do not lie on the rise in consumption habits of the population of the rental system for the acquisition of a vehicle. For households, it is common to view LOA and LLD as a service similar to real estate rental for example. However, although the payments are considered to be rent, the car rental is ultimately based on monthly payments just like a conventional consumer loan.

If a household encounters budgetary difficulties at some point, it is therefore quite possible to lower the amount of the monthly loan payments thanks to the grouping of credits which will include the LOA or LLD in addition to the loans in progress. reimbursement (consumption and immo). This operation will lead to a sufficient reduction in the amount of the new monthly payment for all the loans collected so that the household can rebalance its budget. On the other hand, the fall in monthly payments often leads to a longer repayment period but also to an increase in interest in return for benefiting from a single personalized monthly payment.

Revocation of real estate loans – Attention! Not the best option

At present, the still possible revocation of real estate loans is on everyone’s lips, since mid-June this year, the so-called cancellation joker expires. The point is that numerous loan agreements in the field of mortgage lending, which were concluded between 2002 and 2010, include a faulty cancellation policy.

The loans can be revoked by the relevant borrowers

The loans can be revoked by the relevant borrowers

Therefore, the loans can be revoked by the relevant borrowers without observing a notice period or payment of a prepayment penalty. However, consumer centers are now making it clear that such a withdrawal is not always the optimal way to get low interest rates. Instead, the termination of the loan agreement may sometimes be the better option.

In particular, under the condition that the building loan has been used for at least ten years, the termination is in most cases better for the borrower than the revocation of the loan agreement, which can sometimes be quite connected with disputes and over a longer period if the credit institution does not accept the revocation.

On the other hand, anyone who has been using a real estate loan for at least ten years already has the option of terminating the contract prematurely in compliance with the statutory notice period of three months. This also applies in the event that a longer interest rate agreement has been made.

Banks may not claim a prepayment penalty


It is important to know that even with such early termination, no prepayment penalty has to be paid by the banks. Thus, consumers who terminate their real estate loan in this way have the opportunity to benefit from the currently very low lending rates in this segment.

Basically, it is so that you can not say flat rate, whether the revocation of the loan agreement or the termination is the better alternative. For this reason, affected borrowers should seek advice from as competent as possible, for example, from the numerous represented consumer centers.

Resolution of the Bundestag as background

Resolution of the Bundestag as background

Background of the discussion on whether the revocation of the loan agreement or the termination is more useful, is a recent decision of the Bundestag. The latter had made it clear that credit agreements concluded between 2002 and 2010 that contain a faulty cancellation policy can only be revoked by mid-June of this year. Therefore, many borrowers are now in a hurry to be affected by such a false cancellation policy.

Thus, the Bundestag has implemented an EU directive, namely the so-called residential real estate credit directive. The basic requirement for considering either the revocation of the loan agreement or a termination is, of course, that the loan agreements were concluded on less favorable interest terms than are currently available on the market.

However, when speaking of the period between 2002 and 2010, almost all mortgage loan contracts are likely to have loan rates payable at times much higher than the loan interest rates borne by mortgage lenders today.